Are You Suffering From Business Debt? A CVA May Help

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by Mike Field

saving a piggy bank from going underwaterA Company Voluntary Arrangement (CVA) is in simple terms is a solution to prevent company liquidation. It is an arrangement between your company and its creditors allowing the business to pay back an affordable proportion of the debts to creditors over a period of up to 5 years, with the unpaid balance being written off including any unaffordable VAT and PAYE arrears.

CVAs are ideal for viable but insolvent businesses that have the potential to turnaround and become successful. They are especially valuable when your business has been issued a winding up petition, but you will need to act quickly to start the CVA process. Even with all of these benefits in mind there are still many negative myths and untruths circulating about the success of a CVA, so I thought it was important to separate fact from fiction.

“Creditors think CVAs don’t work”

It is true that a badly thought through a CVA, or a CVA for companies that are fundamentally flawed don’t work. However, if the time is taken to assess the viability of the company, and creditors are presented with a sensibly drafted proposal, a CVA will work and is often a much better outcome for creditors.

In my experience, in circumstances where a well prepared proposal is agreed by creditors for a genuinely viable business, the majority do succeed and creditors receive a better outcome than if the company had ceased trading and been placed into liquidation.

“Our creditors will not continue to supply us”

Actually turn that statement around and ask ‘why wouldn’t they?’. Like you, suppliers need customers to maintain their level of turnover and more now than ever the customer is king.  A well drafted CVA proposal will explain to them why the company is proposing a CVA, what they are likely to receive from the arrangement and how the business is able to make profits in the future. Importantly they will see that they can benefit by being one of its suppliers.

It is important to engage with key suppliers at an early stage, communication makes a massive difference to the relationship. Some suppliers may not offer you the credit terms that you enjoyed previously, but once the trust is built back up, our experience is that the credit offered increases. In the meantime, if you have frozen payment of the old date, you will have access to cash from your customers to pay your suppliers for new goods on a pro forma basis.

Don’t lose sight of the fact that the suppliers need the company to survive, to ensure the CVA delivers the return back to them as creditors and therefore it is in their interests to support the ongoing business.

“HMRC do not like voluntary arrangements”

HMRC consider CVA proposals centrally in a specialist unit and they do have a standard set of requirements that they expect to see in the proposals, but they do also consider the proposal on its merits. As long as the proposal can demonstrate that the business is viable going forward and offers a significantly better return to creditors than in liquidation they are likely to support the proposal.

There are two additional key factors to consider in relation to HMRC’s support.

  1. Is the company up to date with its compliance, ie filing its tax returns, and will it continue to do so for the life of the CVA?
  2. Will the company keep up to date with its future tax payments?

As long as the company does not fall foul of these two points above and complies with the terms of the CVA, HMRC typically support voluntary arrangements.

“The bank will call in their debt”

It is important that as part of a joint approach to the CVA that you discuss your plans and CVA proposals with the bank and any other key stakeholders, at an early stage, especially if the bank has security over the assets of the company for its lending.

Banks generally are supportive of (well thought through) CVAs for businesses that can demonstrate that they are viable. It keeps the value of the business as a going concern and therefore the value of the assets over which they may have security, whereas they could be looking at a shortfall in a liquidation situation.

It also avoids the media attention on the bank if they were to appoint administrators to protect their position where administration is likely to be the alternative route if the CVA is not to be accepted by them or creditors.

One very important consideration as regards the bank and CVAs is that a CVA can prevent personal guarantees being called upon, thereby preventing the guarantors from being required to repay a potentially significant company debt out of personal assets.

“Our customers will not support us”

It is important to carry out an assessment of the likely reaction from customers when preparing the CVA proposals as this is an important factor in the viability of a CVA.

In many cases customers will simply not be aware that the company is even in a voluntary arrangement as the CVA is an arrangement solely between the company and its creditors.

Where they are aware, provided that they are reassured it is unlikely they will want the hassle of finding new suppliers. If they trust you and you have not let them down, why would they now consider you to be more of a risk, now that you have a formal plan in place to deal with historic debts and more importantly, why are you more of a risk than your competitors who have not restructured their debts?

They also may not be able to re-source quickly, so actually the power may be in your hands and you may have more of a hold over them than you think.

One question I am often asked is “should we tell our customers?” and there is no black or white answer to the question, it depends on the circumstances. Some customers appreciate being kept informed and continue to support the business, others have no real interest. It is dependent on the type of business and the relationship you have with your customers. If you are in doubt it is usually simplest to tackle the issue head on and I have not found this to be a particular problem.

Rather than fire fighting irate creditor calls, the CVA will allow you time to focus on developing existing and new customer relationships and you often find that your business is now actually winning more new work as you have time to concentrate on taking the business forward.

“Our staff will leave”

We very rarely hear of staff resigning when they find out what is happening. For a start, they would lose all potential redundancy entitlements and employee benefits. They may not easily be able to find alternative employment and would be unlikely to be eligible for government benefits such as job seekers allowance.

My advice is to plan to meet with the staff as part of the process, to explain what is happening and how it impacts them. The key is usually to be open an honest. Once the position is explained to them, they are usually supportive and helpful.

“I have to pay 100p in the £ to my creditors”

This is simply not the case. The business should offer what it can realistically afford to contribute to creditors from its future profits. If this is more than creditors are likely to receive in a liquidation of the company, creditors are likely to support the proposal.

Importantly, there is no minimum time frame for a CVA, but the length is generally limited to no more than five years and I would usually press for no more than three. If the contributions proposed amount to, say, 40p in the £ over that period then that is the amount creditors receive. The remainder of the debt, so 60% in this example, is written off.

Don’t rely on the advice from the man in the pub, talk to a trusted expert for the facts.

CVAs do work and creditors do support them if the business is viable and the proposals themselves are sensible.

Contrary to the myths, my experience is that there are many advantages to CVAs, and they do work and creditors do support them if the business is viable and the proposals themselves are sensible.


Mike is a business recovery specialist. He started work in the Business Recovery profession in 1987 and has continued to pursue an ethos of working with distressed businesses to help them overcome their financial problems. As an Associate of Cashsolv, he offers advice and support to overcome cash flow problems and identify possible underlying problems that can be addressed to ensure a positive future for your business.





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13 Scary Statistics On Employee Engagement [INFOGRAPHIC]

Jacob Shriar

There is a serious problem with the way we work.

Most employees are disengaged and not passionate about the work they do. This is costing companies a ton of money in lost productivity, absenteeism, and turnover. It’s also harmful to employees, because they’re more stressed out than ever.

The thing that bothers me the most about it, is that it’s all so easy to fix. I can’t figure out why managers aren’t more proactive about this. Besides the human element of caring for our employees, it’s costing them money, so they should care more about fixing it. Something as simple as saying thank you to your employees can have a huge effect on their engagement, not to mention it’s good for your level of happiness.

The infographic that we put together has some pretty shocking statistics in it, but there are a few common themes. Employees feel overworked, overwhelmed, and they don’t like what they do. Companies are noticing it, with 75% of them saying they can’t attract the right talent, and 83% of them feeling that their employer brand isn’t compelling. Companies that want to fix this need to be smart, and patient. This doesn’t happen overnight, but like I mentioned, it’s easy to do. Being patient might be the hardest thing for companies, and I understand how frustrating it can be not to see results right away, but it’s important that you invest in this, because the ROI of employee engagement is huge.

Here are 4 simple (and free) things you can do to get that passion back into employees. These are all based on research from Deloitte.

1.  Encourage side projects

Employees feel overworked and underappreciated, so as leaders, we need to stop overloading them to the point where they can’t handle the workload. Let them explore their own passions and interests, and work on side projects. Ideally, they wouldn’t have to be related to the company, but if you’re worried about them wasting time, you can set that boundary that it has to be related to the company. What this does, is give them autonomy, and let them improve on their skills (mastery), two of the biggest motivators for work.

Employees feel overworked and underappreciated, so as leaders, we need to stop overloading them to the point where they can’t handle the workload.

2.  Encourage workers to engage with customers

At Wistia, a video hosting company, they make everyone in the company do customer support during their onboarding, and they often rotate people into customer support. When I asked Chris, their CEO, why they do this, he mentioned to me that it’s so every single person in the company understands how their customers are using their product. What pains they’re having, what they like about it, it gets everyone on the same page. It keeps all employees in the loop, and can really motivate you to work when you’re talking directly with customers.

3.  Encourage workers to work cross-functionally

Both Apple and Google have created common areas in their offices, specifically and strategically located, so that different workers that don’t normally interact with each other can have a chance to chat.

This isn’t a coincidence. It’s meant for that collaborative learning, and building those relationships with your colleagues.

4.  Encourage networking in their industry

This is similar to number 2 on the list, but it’s important for employees to grow and learn more about what they do. It helps them build that passion for their industry. It’s important to go to networking events, and encourage your employees to participate in these things. Websites like Eventbrite or Meetup have lots of great resources, and most of the events on there are free.

13 Disturbing Facts About Employee Engagement [Infographic]

What do you do to increase employee engagement? Let me know your thoughts in the comments!

Did you like today’s post? If so you’ll love our frequent newsletter! Sign up here and receive The Switch and Shift Change Playbook, by Shawn Murphy, as our thanks to you!

This infographic was crafted with love by Officevibe, the employee survey tool that helps companies improve their corporate wellness, and have a better organizational culture.


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Supply Chain Fraud: The Threat from Within

Lindsey LaManna

Supply chain fraud – whether perpetrated by suppliers, subcontractors, employees, or some combination of those – can take many forms. Among the most common are:

  • Falsified labor
  • Inflated bills or expense accounts
  • Bribery and corruption
  • Phantom vendor accounts or invoices
  • Bid rigging
  • Grey markets (counterfeit or knockoff products)
  • Failure to meet specifications (resulting in substandard or dangerous goods)
  • Unauthorized disbursements

LSAP_Smart Supply Chains_graphics_briefook inside

Perhaps the most damaging sources of supply chain fraud are internal, especially collusion between an employee and a supplier. Such partnerships help fraudsters evade independent checks and other controls, enabling them to steal larger amounts. The median loss from fraud committed
by a single thief was US$80,000, according to the Association of Certified Fraud Examiners (ACFE).

Costs increase along with the number of perpetrators involved. Fraud involving two thieves had a median loss of US$200,000; fraud involving three people had a median loss of US$355,000; and fraud with four or more had a median loss of more than US$500,000, according to ACFE.

Build a culture to fight fraud

The most effective method to fight internal supply chain theft is to create a culture dedicated to fighting it. Here are a few ways to do it:

  • Make sure the board and C-level executives understand the critical nature of the supply chain and the risk of fraud throughout the procurement lifecycle.
  • Market the organization’s supply chain policies internally and among contractors.
  • Institute policies that prohibit conflicts of interest, and cross-check employee and supplier data to uncover potential conflicts.
  • Define the rules for accepting gifts from suppliers and insist that all gifts be documented.
  • Require two employees to sign off on any proposed changes to suppliers.
  • Watch for staff defections to suppliers, and pay close attention to any supplier that has recently poached an employee.

About Lindsey LaManna

Lindsey LaManna is Social and Reporting Manager for the Digitalist Magazine by SAP Global Marketing. Follow @LindseyLaManna on Twitter, on LinkedIn or Google+.


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The Future Of Supplier Collaboration: 9 Things CPOs Want Their Managers To Know Now

Sundar Kamak

As a sourcing or procurement manager, you may think there’s nothing new about supplier collaboration. Your chief procurement officer (CPO) most likely disagrees.
Forward-thinking CPOs acknowledge the benefit of supplier partnerships. They not only value collaboration, but require a revolution in how their buying organization conducts its business and operations. “Procurement must start looking to suppliers for inspiration and new capability, stop prescribing specifications and start tapping into the expertise of suppliers,” writes David Rae in Procurement Leaders. The CEO expects it of your CPO, and your CPO expects it of you. For sourcing managers, this can be a lot of pressure.

Here are nine things your CPO wants you to know about how supplier collaboration is changing – and why it matters to your company’s future and your own future.

1. The need for supplier collaboration in procurement is greater than ever

Over half (65%) of procurement practitioners say procurement at their company is becoming more collaborative with suppliers, according to The Future of Procurement, Making Collaboration Pay Off, by Oxford Economics. Why? Because the pace of business has increased exponentially, and businesses must be able to respond to new market demands with agility and innovation. In this climate, buyers are relying on suppliers more than ever before. And buyers aren’t collaborating with suppliers merely as providers of materials and goods, but as strategic partners that can help create products that are competitive differentiators.

Supplier collaboration itself isn’t new. What’s new is that it’s taken on a much greater urgency and importance.

2. You’re probably not realizing the full collective power of your supplier relationships

Supplier collaboration has always been a function of maintaining a delicate balance between demand and supply. For the most part, the primary focus of the supplier relationship is ensuring the right materials are available at the right time and location. However, sourcing managers with a narrow focus on delivery are missing out on one of the greatest advantages of forging collaborative supplier partnerships: an opportunity to drive synergies that are otherwise perceived as impossible within the confines of the business. The game-changer is when you drive those synergies with thousands, not hundreds of suppliers. Look at the Apple Store as a prime example of collaboration en masse. Without the apps, the iPhone is just another ordinary phone!

3. Collaboration comes in more than one flavor

Suppliers don’t just collaborate with you to provide a critical component or service. They also work with your engineers to help ensure costs are optimized from the buyer’s perspective as well as the supplier’s side. They may even take over the provisioning of an entire end-to-end solution. Or co-design with your R&D team through joint research and development. These forms of collaboration aren’t new, but they are becoming more common and more critical. And they are becoming more impactful, because once you start extending any of these collaboration models to more and more suppliers, your capabilities as a business increase by orders of magnitude. If one good supplier can enable your company to build its brand, expand its reach, and establish its position as a market leader – imagine what’s possible when you work collaboratively with hundreds or thousands of suppliers.

4. Keeping product sustainability top of mind pays off

Facing increasing demand for sustainable products and production, companies are relying on suppliers to answer this new market requirement.

As a sourcing manager, you may need to go outside your comfort zone to think about new, innovative ways to collaborate for achieving sustainability. Recently, I heard from an acquaintance who is a CPO of a leading services company. His organization is currently collaborating with one of the largest suppliers in the world to adhere to regulatory mandates and consumer demand for “lean and green” lightbulbs. Although this approach was interesting to me, what really struck me was his observation on how this co-innovation with the supplier is spawning cost and resource optimization and the delivery of competitive products. As reported by Andrew Winston in The Harvard Business Review, Target and Walmart partnered to launch the Personal Care Sustainability Summit last year. So even competitors are collaborating with each other and with their suppliers in the name of sustainability.

5. Co-marketing is a win-win

Look at your list of suppliers. Does anyone have a brand that is bigger than your company’s? Believe it or not, almost all of us do. So why not seize the opportunity to raise your and your supplier’s brand profile in the marketplace?

Take Intel, for example. The laptop you’re working on right now may very well have an “Intel inside” sticker on it. That’s co-marketing at work. Consistently ranked as one of the world’s top 100 most valuable brands by Millward Brown Optimor, this largest supplier of microprocessors is world-renowned for its technology and innovation. For many companies that buy supplies from Intel, the decision to co-market is a strategic approach to convey that the product is reliable and provides real value for their computing needs.

6. Suppliers get to choose their customers, too

Increased competition for high-performing suppliers is changing the way procurement operates, say 58% of procurement executives in the Oxford Economics study. Buyers have a responsibility to the supplier – and to their CEO – to be a customer of choice. When the economy is going well, you might be able to dictate the supplier’s goods and services – and sometimes even the service delivery model. When times get tough (and they can very quickly), suppliers will typically reevaluate your organization’s needs to see whether they can continue service in a fiscally responsible manner. To secure suppliers’ attention in favorable and challenging economic conditions, your organization should establish collaborative and mutually productive partnerships with them.

7. Suppliers can help simplify operations

Cost optimization will always be one of your performance metrics; however, that is only one small part of the entire puzzle. What will help your organization get noticed is leveraging the supplier relationship to innovate new and better ways of managing the product line and operating the business while balancing risk and cost optimization. Ask yourself: Which functions are no longer needed? Can they be outsourced to a supplier that can perform them better? What can be automated?

8. Suppliers have a better grasp of your sourcing categories than you do

Understand your category like never before so that your organization can realize the full potential of its supplier investments while delivering products that are consistent and of high quality. How? By leveraging the wisdom of your suppliers. To be blunt: they know more than you do. Tap into that knowledge to gain a solid understanding of the product, market category, suppliers’ capabilities, and shifting dynamics in the industry, If a buyer does not understand these areas deeply, no amount of collaboration will empower a supplier to help your company innovate as well as optimize costs and resources.

9. Remember that there’s something in it for you as well

All of us want to do strategic, impactful work. Sourcing managers with aspirations of becoming CPOs should move beyond writing contracts and pushing PO requests by building strategic procurement skill sets. For example, a working knowledge in analytics allows you to choose suppliers that can shape the market and help a product succeed – and can catch the eye of the senior leadership team.

Sundar Kamak is global vice president of solutions marketing at Ariba, an SAP company.

For more on supplier collaboration, read Making Collaboration Pay Off, part of a series on the Future of Procurement, by Oxford Economics.


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Do You Hear The Voice Of Your Customer?

Maria Morais

Try to find a company where customers bring something else other than cash, credit, or points in loyalty cards. You won’t find much. – John S. McKean

While most companies seem to have a good grasp of what “voice of the customer” means and its importance, there seems to be a big challenge around the cultural shift that the voice-of-the-customer strategy requires in order to be truly effective.

The main reason why companies don’t implement a customer-centric strategy is because they assume that they are in charge.

  • Companies give promotions to their customers;
  • Companies produce products that customers really want;
  • Companies collaborate with their customers in social channels;
  • Companies “target,” “acquire,” “manage,” and “retain” customers as if they were not able to manage their own wills.

The thinking behind all this mentality dismisses customers’ individual differences and customers’ real ability to contribute.

Many of us expected the balance of power between companies and customers to shift with omni-channel retail, but in fact companies are less involved with their customers thanks to big data, analytics, business intelligence, and programmatic marketing.

Collaboration doesn’t mean engagement

If the company is in charge, by creating methods of engagement, predicting behavior, and controlling the customer experience, the customer is not more than a number that belongs to a group of other similar “variables.” How can you really hear the voice of your customer with all this noise around you?

Improving technology to satisfy companies is not a substitute for direct knowledge voluntarily given by customers. Over the coming years customers will be emancipated from systems that were built to control them, and customer relationship management (CRM) will finally die as a software category.

Looking beyond CRM

Information mining is a key phase in any voice-of-the-customer strategy, and ethnographic methods have been proven to be the most efficient for customer-centric innovation rather than the usual quantitative methodologies. Companies need systems that aggregate raw data from all touch points affecting decision making in real time. This type of initiative typically has a significant upfront investment before measurable benefits can be realized, but even knowing that digital transformation is moving much more rapidly in some industries than in others, no one can afford to wait much longer.

Companies that invest in their customers now are the ones that will see the biggest profits in the future. The voice of the customer is rapidly evolving along with anything connected via the Web, and customers will completely stop sharing their voice with companies that simply follow legacy approaches and are obsessed with statistical inferences.

It’s time to change; it’s time to inspire your customers

Take our e-commerce self-assessment to see how you can deliver the omni-channel experience.

Learn how Technopolis is delivering a superb omni-channel shopping experience to its customers.

Find out more about the omni-channel customer experience in the SAP eBook Digital Disruption: How Digital Technology is Changing Our World.


About Maria Morais

Maria Morais is Customer Engagement and Commerce Retail Lead at IBM GBS. You can follow Maria Morais on Twitter @ceumorais.

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